 If we went to the moon and back 50 years ago, directed by the state and fostering an immense amount of partnership with business, what would it look like if we did that with the sustainable development goals, these social problems that are much more wicked and difficult in some ways than going to the moon, but that require that equal amount of urgency, of seriousness, of collaboration, of catalyzing, you know, bottom-up innovation? This is Rob Johnson, President of the Institute for New Economic Thinking. I'm here today with my friend, Mariana Mazzacato. She is the co-founder and director of an institute at the University College London on the questions of innovation and public purpose. She is a frequent author. Her books include The Entrepreneurial State, The Value of Everything, and her newest book that we'll talk about in some detail today, The Mission Economy. Mariana, thanks for joining me. Hi, Rob. Thanks so much. It's wonderful to see you. You too. So here we are in this turbulent prolonged time of pandemic, climate change on the horizon, social sustainability, just whether it's in North-South or I call the first and third worlds inside of each advanced country, there are a whole lot of things that need to be addressed. And I believe which might say the pandemic is awful, but there might be a silver lining in that it was the catalyst. It was an awakening. It was an unmasking. What are you seeing that you like? What are you seeing as opportunity? What are you seeing you don't like and what do you wish you were seeing so you could like it more? Wow. Great set of questions. I wish every conversation would begin like this. I guess what I like is that there is a real realization that this time it's different. If you think back to what happened with the financial crisis, we just flooded the system with liquidity and hope for the best. This time what's really interesting globally is we have recovery packages that are not only very large, but they are increasingly structured. So in Europe, where I'm sitting, I'm sitting, well, I'm in the UK, Brexit, but yes, we're still in Europe. The EU recovery fund is actually conditional on governments that receive the funding to invest and to innovate around two big challenges that we have globally, which is climate change and digitalization. We didn't have that before. That's new. That's like a directed Marshall plan. Now, whether it actually leads to what we hope it leads to, we can talk about later, but at least it's there and we didn't have that. With the financial crisis, most of the money that inundated the system actually ended up back in the financial sector. I think another thing that I find inspiring is that there is a realization that we're all only as healthy as our neighbors on our street, in our city, in our nation and globally. Had this crisis begun, for example, in an African country with a much weaker health system than the Chinese health system, we would all globally be worse off. So this realization that actually what we really need are stronger global health systems could potentially, this is the opportunity, I'm not saying it's a reality, wake us up to the fact that we need to revitalize and reimagine really a global welfare state. And I guess what I'm not seeing is both of those things necessarily leading to the kind of actions and the speed that we really require them to in order to make those a reality. We already see now with the vaccine, for example, what Dr. Tedros, the head of the World Health Organization calls a vaccine apartheid, so hoarding of vaccine doses in rich countries. We also don't necessarily have solidarity in terms of how we govern vaccine production in terms of really fostering, again, what the WHO calls collective intelligence through a patent pool to make sure that all the knowledge really is shared globally. So the same things that are an amazing opportunity that we have the seed for are also the challenge. If we don't get the concrete action, then actually the fact that we're talking about solidarity and then don't govern it in a concrete way becomes actually part of the problem. When you talk about the who, I always think of Pete Townsend and the song for today is, we won't get fooled again. So I think these questions of, I mean, Muhammad El-Aryan just wrote a Project Syndicate piece where he said, none of us are safe until everyone's safe. And I just see this rising consciousness of the collective responsibility. I used to worry in the United States, we had this horrible episode of shooting in Sandy Hook schools. And I always said, freedom isn't the freedom to carry a gun, it's also the freedom from being shot by others. Why aren't these freedom to and freedom from in balance? And the health crisis brings that on a much larger scale and international scale back into focus. By the way, another, sorry, just one other thing that's inspired me, actually, because it's good to also say more good things, given that we're living through so many tragedies right now. Something that's inspired me has been seeing how some countries that are still really developing have actually done incredibly well in terms of how they've governed the crisis. And that has been related to investments that they've been making historically within their own public administrations. And I'm thinking of places like Vietnam, or the region of Kerala in India, and, you know, have actually done better than the UK in many respects, where we actually outsource so much of our public competence to a consulting company, something that recently a Tory Lord called Lord Agnew called the infantilization of governments, quite interesting. But anyway, you know, seeing this very different and heterogeneous experience globally, I think always reminds us that decisions matter, strategy matters, policy matters, both in government, but also in the business sector. I've always said this in business, as have many of your grantees, I'm sure. You know, the fact that you have different, you know, business practices, but that these also then determine different levels of growth, different types of working conditions, different types of innovative performance in the business literature is about strategy mattering. But we sometimes forget about that also within the policy space. And we end up thinking that, you know, oh, politics or yeah, policies are all sort of top down and we'll see if they work or not. But the fact that really concrete ability to govern such an immense crisis has had differing, you know, performance achievements, if you want, depending on what actually happened, how we govern relationships between the state, academia, business, civil society organizations, there's so many lessons there that we can learn from. Yeah, my former partner in the documentary film business, Alex Gibney, has made a film called Totally Under Control, which is a mockery of the relationship between the Trump administration's response and South Korea's response to the COVID crisis. And he released that 10 days before the presidential election to, I should say, try to nudge things along at the time we were all headed to the voting booths. But these, how'd I say, these differences in governance, there's a book right now, a very controversial America called Capitalism on a Ventilator, which is comparing the US and the Asian responses to COVID and saying, what is it that makes you think the world's going to want to emulate the United States of America after our performance since last March? Obviously, we have a new administration in power now, and it's a chance to change our mode of behavior. But that was not a particularly strong demonstration of the greatness of the United States of America. Yeah, I mean, things change, right? So the US, if you think about how it reacted in terms of transforming and transitioning its productive structure to produce kind of war time needs in World War II, the Defense Production Procurement Act, for example, where they were able to do that also required a lot of interaction, for example, with trade unions, without the trade unions, that quick transformation wouldn't have been possible. And I think looking at the varieties of capitalism, both globally, but also within any one country, how its way of doing capitalism changes over time is quite again interesting and seeing how that then determines the transformative capacity, the structural capacity on the ground to produce things, to produce personal protection equipment, to produce a functioning test and trace system. But again, during World War II, it wouldn't have happened without a very specific form of both government but also its interrelationship with civil society organizations like trade unions. And that brings us, I guess, to your book, Commission Economy, which I've had the good fortune to look in an advanced copy, at least vis-à-vis the United States, it's an advanced copy. And I look forward to everybody being able to find it, read it, and so forth. But let's talk about, first, what inspired you to write that book now? You've written the value of everything, the entrepreneurial state, you're very involved at high levels of policy all over the world. What did you want to say in this particular book? I think, I mean, the reason I wrote it is on the back of the entrepreneurial state, which I wrote back actually in 2011 as a pamphlet, which then got circulated to policymakers worldwide. It then became a full-fledged book with extra chapters in 2013. That really appealed to a lot of policymakers. It really was about similarly, actually, before Bill Janeway's book, about very much those issues about that innovation-led growth in places like Silicon Valley. But also, if you look at what's happening in China today, if you look at what's happening in Denmark today, which by the way is the number one provider of high-tech green digital services to China's green economy and China spending 1.7 trillion on greening its economy, you couldn't explain that success without looking, not only at the role of the state on kind of that early stage that you were talking about, but also on the demand side, also really helping those companies that want to innovate to actually scale up, so not just startups, but scaling up. And that kind of thirst to know more about that story, changing the narrative of the state, going beyond just market fixing to what I call co-creating and co-shaping markets, led me actually to work with many different policymakers globally. And more recently, the way I was working, especially in the European Commission and with different countries' industrial strategies, was this idea that we could do better than just make a list of kind of great sectors to finance. It really needed to learn the lessons from the internet, where the internet was a solution to a problem. So it wasn't just that DARPA financed it. DARPA was trying to solve a problem, which was getting the satellites to communicate. So this idea of putting on the front end of policymakers' minds, what are the problems you're trying to solve? And how can you then use a problem-based, a purpose-driven, what I call a mission-driven approach to get as many different sectors in your economy to innovate, to collaborate, to invest, and literally put that into the design of procurement, grants, loans, and industrial strategy to crowd in kind of that bottom-up experimentation. So my experience in actually working with the European Commission or with ministers of state, like Greg Clark, who is the minister of business here in the UK, but also in the South African government and Brazil and so on, just led me to believe kind of two things. One, this is much harder to do than to just talk about. And I wanted to write a book about the nitty-gritty that I was learning along the way, but also just what an inspiring kind of set of points it is when you change how you think about policy, instead of thinking of it as a top-down process. You go lecture everyone that they should be fostering a carbon-neutral city. What does it actually mean to bring different actors to the table? To actually in some ways co-design the process. You need that kind of top-down idea of what it is we want to do, but the how to really catalyze as much innovation, investment, and collaboration. You really need what is often talked about as stakeholder capitalism, but I think it's really just talked about in terms of corporate governance. So bringing this notion of stakeholder value to the design process of how business, government, civil society organizations coming back to our point before work together at the local level to produce change, that requires rethinking not only the role of the state, but literally what policy is for and how to design it. So I wanted to write a book which kind of gave that sense of hope that we can do so much better and also some of the how. And the reason I kind of focused on the moon landing was I don't think people realized just how much collaboration went on. It wasn't just NASA. There was lots of investment from companies like General Motors, Honeywell, Motorola, but also many others. And the collaboration really was purposeful. NASA actually cared about things like how to design the procurement to also get a good deal for NASA. They even had a no excess profits clause, which is quite interesting. And really believe that in order to even know how to write the terms of reference of a partnership with business, they required themselves dynamic capabilities, what through my institute we call the dynamic capabilities of the public sector. And so because there's so much kind of government bashing out there saying, oh yeah, Mariana, you talk about the entrepreneurial state, but actually look at what kind of states we have this that the other, that's a self-fulfilling prophecy, right? The more you think at best the state is therefore at best to fix market failures. The less you actually have an incentive to invest within state institutions and all those things they need to do much more than that. So to be collective kind of value creators coming to the language of my other book on value. Any business that wants to create value will think about really intricate questions around organizational behavior, decisions, sciences, strategic management, all these great things that people study in masters and business administration. And yet public choice theory, new public management, which has really trickled down from Chicago type economics, has basically convinced so many civil servants that not only the best they can do is to fix markets, but even worse, government failure is even worse than market failures. So occupy as little space as possible and then get out of the way. And that has reduced our competence, the capabilities within state institutions. And I guess the real reason I wrote the book was to revitalize our belief that, you know, if we went to the moon and back 50 years ago, directed by the state and fostering an immense amount of partnership with business, what would it look like if we did that with the sustainable development goals, these social problems that are much more wicked and difficult in some ways than going to the moon, but that required that equal amount of urgency, of seriousness, of collaboration, of catalyzing, you know, bottom up innovation, but also really getting good deals, you know, to make sure we don't get what we ended up with in Silicon Valley, which was a huge amount of state investment, socialization of risk, and then privatization of rewards. And we've seen that in the bit of the pharmaceutical world as well. Absolutely. The taxpayer is putting up a lot of the basic research. Yeah. I think there's published research on that in recent months and then it's, how would I say, the product is privatized and the state doesn't own an equity holding in the successful pharmaceutical products that are created. But also we've covered the patent system, right? I mean, even with the vaccine right now, unless we have, you know, the patent tool that, you know, Dr. Kedrus has been arguing for, we're going to have again, a system where you have huge amounts of public and private, but a lot of public money going in, and then the patent system is misgoverned. What William Balamall used to call unproductive entrepreneurship, you know, this kind of guidance through the patents. And I brought a quote from reading of your work that I wanted to, how do I say, put on the table. You said, these myths have been accepted as truth by so many, but none of them are inevitable. By rejecting these myths, we can rethink what the role of government should be in society. The problem is not big government, small government. The problem is the type of government and what it does and how it should set off a catalytic reaction in society. So you're envisioning, and what I guess I'm saying is we got to get over those stale myths. And now there's a void and you're trying to fill the void with a constructive vision of what to do. And boy, that's a lot better than despair in my work. So what kind of myths do you think get in the way of the things that a government in collaboration with people deciding what values are that are worth purpose? What gets in the way? What are the myths that are the resistance that you experience as you're working? So there's a lot of them. I mean, the first, of course, is that as soon as you start talking about the need for smarter government, more capable government and the investments that are required, you get seen as someone who just thinks the state does everything and you need a bigger state. And it's amazing how many intelligent people, even some of your friends, Rob, will go down that route and don't kind of get the point that actually this is all about partnership. It's all about collaboration. But if you don't have a bold, ambitious government that really gets what its role is, then business also loses out. So it's not about saying government is more important. It's that it's impossible to also get the kind of public-private partnerships that we need if we've reduced our understanding and our thinking about the state to, again, be at best an enabler of business. Even people really believe in stakeholder value. I was on a Davos session at the opening of the World Economic Forum a couple of weeks ago. And one of the biggest proponents of stakeholder value actually said, business is the prime wealth creator in society. And what we need is to make sure that wealth is shared. And that was the concept of stakeholder value that was being propagated. And I said, no, hold on a second. Stakeholder value must begin with a real conviction if we believe in stakeholder value that value is collectively created. It's not just created in business. Of course, business creates value. But so does government. And so do increasingly, by the way, nonprofit organizations in some sectors like in health. And so what do we know about their ability to do so? What are the structures that are required? What's the culture? What's the type of thinking in terms of kind of portfolio thinking that we were just talking about before in terms of the kind of investments that are required? If you don't admit that you're also a value creator, you don't even ask those questions. So I think that's the biggest myth that, well, two, I guess, I just unpacked two myths. One is that as soon as you talk about the need for a smarter, strategic, and my words, mission oriented state, you're all just about the state as opposed to what is actually at the core of the point, which is that we need that in order actually to work together with other actors better. And two, another big myth is again, that about value, which is, okay, fine, we can have a state, a bold state doing a donation, but it's really just enabling, facilitating, de-risking this word I can't stand, de-risking the risk taking within business. So this myth about who's actually a risk taker is another issue. Because if you admit that you're a risk taker, of course, it's also going to be accepted that you'll make mistakes. And so a big problem in bottleneck, the third one here, is that as soon as a civil servant or public servant makes a mistake, they're in the front page of the Daily Mail. So there's plenty of people that as soon as you do talk about the state as being possibly much bolder, will start listing all sorts of mistakes that states have made, whether it's Concord that isn't flying, or the UK, British Leyland that received backing, or Selindra in the US. And so that's again, a myth that comes from another myth, which is if you don't admit that you're value creating, and you don't actually then think about things like trial and error. If you're really there just to enable business, then you shouldn't be making any kind of bold investments. And because actually taking risks, not just de-risking, will require making some mistakes, if we don't have a framing that understands a risk taking state that is doing so in order to foster, for example, a green transition, then just because it makes a mistake like Selindra, bang front page. And so one of the things with this, I already started doing it in the entrepreneurial state, which is to say, hold on, what if you actually looked at all the different investments, literally through a portfolio approach, you'd realize that when Selindra happened, Tesla also happened, the two companies actually received almost the same amount of money during a period where Obama was actually trying to foster a directed recovery after the financial crisis. That then sort of failed in terms of all the political infighting with the Tea Party. But a portfolio approach would allow you to say, yeah, of course, we're going to make some mistakes. Just speak to Bill Janeway or any venture capitalist. For every success, you will have many failures. But how do you make sure you're not just bailing out the failures, but also getting some of the upside? And even though I've spoken about that in the entrepreneurial state, what I did in this book, based on the kind of concrete work I've been doing with governments worldwide, is to say, okay, look, it's not enough to say we need more purpose driven policy. We need to look at the tools. What does it actually mean to have a portfolio approach? So you're not picking winners. Again, another myth that it's all about picking winners. You're not picking winners, but picking the willing. That what you're doing is you're fostering a transition. You're making choices. Of course, you're picking directions. But then you don't just hand out money to types of companies like small, medium enterprises or types of sectors, a list of your top sectors or types of technologies like quantum computing. But you really focus on problems and make sure that all your different sectors really are collaborating and investing towards that goal. And look at the policy redesign that's required to foster that intersectoral and bottom up experimentation. But also, lastly, just want to say something about the narrative. Given what I just mentioned, that as soon as you make a mistake, you're in the front page of the paper. What does it mean to create a different narrative and literally story of how wealth is created and the capabilities that are required in all different types of organizations, but also this idea that you're not really there to level the playing field, a mythological way to talk about what governments for, but tilting the playing field. Again, taking risks and admitting that the economy has not just a rate, but a direction, and that we need a lot of debate. And we need a national debate about which direction do we actually want to go. And talking about directionality of growth, not just the rate of growth, already starts to pose so many different questions for policymakers and requires a different language. Again, not leveling, but tilting, not de-risking, but taking risks, not fixing markets, but co-shaping and co-creating markets. And all these different words actually amount to a different story. Because it is a different story. It's a different feeling of what it is that we're actually talking about in terms of policy and, again, collaborations between public and private. It's not simple. And you acknowledge that very humbly in your book. You acknowledge it over and over and over again. But we can't not pursue this agenda. Yeah. I have a chapter where I just talk about those myths. And I also try to demythology some of the words that we use. So the five myths that I talked about are value, markets, efficiency, capabilities and direction. But just the markets one for a minute. Even some heterodox economists sometimes get sloppy, including myself, with how we use the word the market. The market is not the same thing as business. So when we say the market versus, say, the state, it's really what we're talking about is business in the state. But markets are the outcomes. Markets are the outcomes of how we govern business, how we govern government. There's different ways to govern. We know this business, stakeholder, shareholder value. There's different ways to govern public organizations, right? Whether they're just market fixing or actually explicitly about co-creating and co-shaping markets. And that's where that BBC example comes in that I just wrote a report on. The BBC as an organization has actually explicitly within tried to achieve public value. This really interesting word that they've used to also monitor their own remit really and what they do and the success of what they do. But markets are an outcome of these governance decisions and interrelationships, right? So then how government and business work together, how they relate, what is the deal literally within the contracts. I always come back to the issue of contracts. Everything in the end is almost a contract. Patents are contracts. Procurements are contracts and procurement is a huge portion of government budgets. We can design these in different ways and they do matter. Coming back to our first point about also with COVID, just seeing the real differences and how governments have performed depending on that capacity. And the miss around efficiency have really led to a lot of this outsourcing of the government brain to the private sector. There's no problem with some outsourcing, but it depends what you're outsourcing. I would argue that the whole NSA scandal and the Snowden affair in some ways is an outcome of the US government having outsourced its IT kind of system and management and understanding of information technology and digital capabilities. So this is precisely what this Lord in the UK government Lord Agnew called the infantilization of government, which is when you're overly consultifying your structures. And this is what NASA in the story that I tell about the moon landing was actually very aware of. There was this wonderful quote by Ernest Brackett, the head of procurement and NASA, who said, we have to be aware of brochuremanship. Today, this would be the PowerPoints of the Deloitte, the PWCs, at the time that must have been private sector companies coming in and said, yes, pay us this because we're so good at this, that and the other. And they did collaborate a lot with business, but they did it from a perspective also of their own expertise and understanding of the world around them. And as soon as you start stop investing within your own dynamic capability within the public sector, you can't be, you know, you won't know how to write those terms of reference and you won't be a good partner and you will get captured. And that's the irony of it all. Those same people who worry so much about government capture and corruption. It's actually that mentality in some ways that leads to capture because by not believing in what government can do, if we structured it properly, then you end up with pretty lame and inefficient and easily captured government institutions. If you look at Singapore, they pay and train their civil servants so they don't have to be part of the revolving door when their kids go to college. They pay them, they give them pensions, they give them budgets, they give them training so they can be excellent and they can do it for a career. There's a lot of work to do. So that the experience of the public sector that we have in the aftermath of the kind of wreckage that began with the Reagan years can validate your vision. We got to bring the things that make people higher quality and more confident and more courageous to the table so that the population can then look at it and say, wow, those guys are good. They did good. They weren't corrupt and they didn't spin off them, how do I say, collect a salary from my tax money for a decade and then spin out to the people they were actually working for? Yeah, you're absolutely right and it's both pay and working conditions but it's also the remit. So just think of someone like Steve Chu who is a Nobel Prize winner in physics in the US, a Chinese American. He accepted to go be a civil servant to run the Department of Energy under Obama, not because Obama said, oh, come in and help design at best a carbon tax so we can de-risk business or fix a market failure. What Obama invited him to do is direct an agency which Obama really wanted to help again direct the 800 billion stimulus program because he wanted this green recovery after the financial crisis. And I'm sure, well, I can't say I'm sure. No one can be sure but I really don't think Steve Chu would have accepted that job had it not been as ambitious the task which was come in, direct this agency, set up an ARPA-E which is what he then did. He brought in Arun Majumdar to direct ARPA-E itself. He then ended up being the head of energy for Google, Arun Majumdar. So that revolving door was more based on actually capability. You were coming into a Department of Energy which was seeing itself actually as an investor of first resort, not just the lender of last resort, hence that portfolio perspective we were talking about before, Tesla and Solyndra and so on. And it's an honor to work for such an agency. So you can also do it through pay and Singapore does pay up to I think a million dollars to the heads of their departments but also all civil servants get very good pays and pensions but it's also about what, you know, how you're described. What is your role? What is the remit of the place where you're working? Are you actively co-creating value or just fixing the mistakes that happen along the way with business? You're leading by example, you're practicing what you preach and I really wish you the best and hope to be supportive of you convincing people because there is a cynicism that those of us who think that government can play a different role are just romantically foolish. Yeah. Just like the market fundamentalists were romantically foolish and it's incumbent upon us to persevere with the courage to bring this new design, to sing this new song and thanks. I'm very grateful that you came and talked about it with me today. Thank you so much and I'm very grateful that you've taken extra time.